• The Journal of the Korea Contents Association
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• v.9 no.1
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• pp.304-311
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• 2009

This article proposes a new time-based depreciation method using the accumulated depreciation rate function. The method can systematically compute the depreciation charge of each period, in every case where the charge is constant or decreasing or increasing, and solve the problems of depreciation methods currently used, by obtaining the accumulated depreciation charge at any given time. We can choose diverse rational depreciation types for the characteristic of every asset with the new method, and compute the depreciation charge with consistency in all cases where assets are owned for partial period.

• The Journal of the Korea Contents Association
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• v.15 no.1
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• pp.519-526
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• 2015

This article presents detailed explanations of the depreciation method using the accumulated depreciation rate function(ADRF) proposed by the author previously, for the practical application. ADRF provides a value of accumulated depreciation rate on the total depreciation charge at any given time, therefore it can be used in a time-based depreciation method. Since the depreciation charge of each period can be systematically computed with ADRF, in every case where the charge is constant or decreasing or increasing, we can choose diverse rational depreciation types for the characteristic of every asset. Also, since the ADRF is the continuous function of time, we can compute the depreciation charge with consistency in cases where assets are owned for partial period. However, we should determine the value of parameter of ADRF. We give some data on the problem.

• International Journal of Highway Engineering
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• v.19 no.3
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• pp.19-30
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• 2017

PURPOSES : This study proposes the road asset valuation approach using alternative depreciation methods. It has become necessary to have asset management system according to the adoption of accrual basis accounting for governmental financial reporting and the amendment of the road act. Therefore, it is very important to analyze the effect of depreciation methods on road asset value as a basic research for road asset management system. METHODS : The Ministry of Strategy and Finance (MOSF) has mainly performed road asset valuation based on Write down Replacement Cost and Straight Line depreciation method. This study suggests some appropriate asset valuation methods for road assets through case analysis using three depreciation methods: Consumption-based depreciation method, Condition-based depreciation method, and Straight Line depreciation method. A road asset valuation data of national highway route 1 (year 2014) is used to analyze the effect of three depreciation methods on the road asset value. Road assets include land and structures (pavement, bridge, and tunnel). This study mainly focuses on structures such as bridges and tunnels, because according to governmental accounting standards, land and road pavement assets do not depreciate. RESULTS : The main results of this study are as follows. Firstly, overall asset value of national highway route 1 was estimated at 6.97 trillion KRW when MOSF's method (straight-line depreciation method) is applied. Secondly, asset value was estimated at 4.85 trillion KRW on application of consumption-based depreciation method. Thirdly, asset value was estimated at 4.37 trillion KRW when condition-based depreciation method is applied. Therefore, either consumption-based or condition-based depreciation methods would be more appropriate than straight-line depreciation method if we can use the condition data of road assets including land that are available in real time. CONCLUSIONS : Since road assets such as pavements, bridges, and tunnels have various patterns of deterioration and condition monitoring period, it is necessary to consider a specific valuation method according to the condition of each road asset. Firstly, even though road pavements do not depreciate, asset valuation through condition-based depreciation method would be more appropriate when requirements for application of non-depreciation approach are not satisfied. Since bridge and tunnel facilities show various patterns of deterioration and condition monitoring period by type and condition level, consumption-based depreciation method based on deterioration model would be appropriate. Therefore, it is necessary to have a reasonable asset management system to apply condition-based depreciation method and a periodic condition investigation to manage road assets well.

• New & Renewable Energy
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• v.16 no.4
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• pp.65-75
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• 2020

The value of tangible assets depreciates over their useful life and this depreciation should be adequately reflected in any tax or financial reports. However, the method used to calculate depreciation can impact the financial performance of solar projects due to the time value of money. Korean tax law stipulates only one method for calculating the depreciation of solar photovoltaic facilities: the straight-line method. Conversely, USA's tax law accepts other depreciation methods as solar incentives, including the modified accelerated cost recovery system (MACRS) and Bonus depreciation method. This paper compares different depreciation methods in the financial analysis of a 10 MW solar system to determine their effect on the financial results. When depreciation was calculated utilizing the MACRS and Bonus depreciation method, the internal rate of return (IRR) was 10.9% and 16.4% higher, respectively, than when the Korean straight-line depreciation method was used. Additionally, the increased IRR resulting from the use of the two US methods resulted in a 20.5% and 27.4% higher net present value, respectively. This shows that changing the depreciation calculation method can redistribute the tax amount during the project period, thereby increasing the discounted cash flow of the solar project. In addition to increasing profitability, USA's depreciation methods alleviate the uncertainty of solar projects and provide more flexibility in project financing than the Korean method. These results strongly suggest that Korean tax law could greatly benefit from adopting USA's depreciation methods as an effective incentive scheme.

• KSCE Journal of Civil and Environmental Engineering Research
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• v.32 no.4D
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• pp.357-366
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• 2012

Construction equipment has applied to depreciation over the years, however, the price index for construction equipment is not properly reflected in existing quantity per unit and the local tax law. Thus, this study shows the analysis of the corporate tax law, the local tax law and business accounting standards, characteristics of the domestic depreciation system and depreciation methods, and the capital recovery factor of construction equipment applying the theory for economic efficiency. It also presents cases of depreciation on the basis of quantity per unit and tax law using straight-line depreciation method and declining balance method. It is proposed that the relations of the application system of permissible period for construction equipment and the existing system be explained and the application system of permissible period for construction equipment be imposed. Furthermore, it proposes the development of depreciation tables of construction equipment monthly expenses based on the domestic price index and applications. In addition of that, it proposes the analysis of pros and cons of the methods suggested and application limits of the study and subsequent improvement plans. This study should reflect more rational and objective reality in quantity per unit and tax law.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.29 no.1
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• pp.143-150
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• 2006

Box-Cox model and T-factor method have been widely used to measure economic depreciations for industrial property. The Box-Cox model which combines economic efficiency with depreciation pattern is here extended to the reliability function. To do so a Rayleigh distribution which has been used to estimate the reliability of current assets was chosen as an efficiency curve of marginal productivity. Such an approach provides the possibility to classify the efficiency curves into four categories. It is also possible to analyze the types of depreciation curves. Therefore, the power family of a non-linear Box-Cox model could be set at certain constant values, then the model can be transformed into a linear model to estimate the economic depreciation rates by utilizing the reliability function. Estimating the resultant linear regression equation requires minimal number of observations, while at the same time facilitating the test of hypothesis on depreciation rates.

• Nuclear Engineering and Technology
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• v.48 no.3
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• pp.733-743
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• 2016

The purpose of this study is to present a rational depreciation method for a pyroprocess cost calculation. Toward this end, the so-called advanced decelerated depreciation method (ADDM) was developed that complements the limitations of the existing depreciation methods such as the straight-line method and fixed percentage of declining-balance method. ADDM was used to show the trend of the direct material cost and direct labor cost compared to the straight-line or fixed percentage of the declining-balance methods that are often used today. As a result, it was demonstrated that the depreciation cost of the ADDM, which assumed a pyroprocess facility's life period to be 40 years with a deceleration rate of 5%, takes up 4.14% and 27.74% of the pyroprocess unit cost ($781/kg heavy metal) in the $1^{st}$ and final years, respectively. In other words, it was found that the ADDM can cost the pyroprocess facility's capital investment rationally every year. Finally, ADDM's validity was verified by confirming that the sum of the depreciation cost by year, and the sum of the purchasing cost of the building and equipment, are the same.

• KDI Journal of Economic Policy
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• v.40 no.2
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• pp.23-52
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• 2018

Given the limited availability of data in South Korea, this study proposes a method by which to estimate regional capital stock by modifying the benchmark year method (BYM) and applies it to estimate regional net capital stock by sector in transport infrastructure. First, it estimates time-varying sectoral depreciation rates using the sectoral net capital stock and the investment amount for each period. Second, it estimates the net capital stock of each period using the net capital stock in the base year and the investment in each period. Third, in order to ensure that the sum of net capital stocks by region is equal to the nationwide estimate, the national estimates are allocated to each region according to the proportion of the values derived from the previous stage. The proposed method can alleviate well-known problems associated with conventional BYMs, specifically the upward bias and arbitrary choice of the depreciation rate.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.19 no.39
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• pp.229-234
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• 1996

When we analyze equipment replacement problem, we take the table of the duration period of tangible fixed asset on the corporation income tax law, and treat depreciation as simple allocation process for capital recovery. In this problem, there are some papers considering the concepts of economic depreciation. Those are not perfect model from a economical point of view. Therefore, we deal with equipment replacement problem considering the engineering valuation as well as the economic concept in the evaluation of asset.

• Journal of Korean Society of Industrial and Systems Engineering
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• v.30 no.4
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• pp.170-181
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• 2007

The purpose of computing economic depreciation value is to find valuation of assets closely in line with market prices. The valuation of industrial assets are called Engineering Valuation. The two representative techniques for such valuation are Hulten-Wykoff Method, which estimates real value using regression equations, and T-factor Method devised at Iowa State University. The two are all empirical methods for computing service life (duration period). In this paper, we derived the service life by empirical methods using national wealth statistics, and also by more conventional methods such as original group method and retirement method. The results from each method are compared with one another. We also computed economic service life from these results. In S. Korea where amount of asset value statistics is still insufficient, the most effective method for empirically computing economic service life turns out to be the one using national wealth statistics. In addition, we also present economic relationship between depreciation value computed by using Hulten-Wykoff Method and depreciation value computed by using T-factor Method.